Student loans add £12bn to borrowing

A STRING of accounting changes have blown the Government’s deficit reduction plans off course ahead of a major public spending spree.

Revised figures published by the Office for National Statistics (ONS) show that the Treasury, which is led by new Chancellor Sajid Javid, is set to breach its selfimposed borrowing limit this financial year.

Changes to how student loans are counted, made to reflect the fact that around half are not expected to be fully repaid, have added £12.4bn to the borrowing figures for the year ending last March.

The revised numbers from the ONS showed that borrowing in the year to March 2019 hit £41.4bn, up 75pc from previous estimates which did not include the accounting changes.

This was 1.9pc of the size of the UK economy, just under the Conservatives’ limit of 2pc.

But despite expectations that borrowing will rocket to £53bn by the end of this financial year, August’s numbers were better than expected.

Britain’s public finances showed their first sign of improvement this year, as the budget deficit dipped from £6.9bn to £6.4bn.

Economists had been expecting up to £7.8bn.

However, new plans to end austerity could pile further pressure on borrowing.

The Chancellor has promised to spend another £ 13.8bn on departmental budgets and vowed to plough more money into infrastructure.

The Prime Minister, Boris Johnson, has also vowed to cut taxes, piling more pressure on the public finances.

And Javid has already said that he will reform his rules on borrowing limits.